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CU System

CU savings rise loan growth to fall

MADISON, Wis. (5/5/09)--The credit union movement’s capital-to-asset ratio fell to 9.58% in March from 10.26% in February as credit unions recognized the costs of the Corporate Stabilization Plan, according to Steve Rick, senior economist with the Credit Union National Association (CUNA). With earnings expected to be weak and savings growth strong, the capital-to-asset ratio could fall below 9% later this year, Rick added. Credit union loans outstanding decreased 0.1% in March, but rose 0.6% for the first quarter of 2009, according to the March CUNA monthly sample of credit unions. Fixed-rate first mortgages rose 1% during March, followed by increases in adjustable-rate mortgages (0.5%), used-auto loans (0.4%), and other mortgages (0.1%). Declining in March were other loans (4.1%), home equity loans (1.1%), credit card loans (0.7%), and unsecured personal loans (0.6%).

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Credit union savings balances grew 1.2% in March, the same rate as during March of last year. Savings growth for the first quarter of 2009 was 5.7%, compared with 5% for the same period last year. Growing in March were money market accounts (3%), regular shares (2.5%), one-year certificates (1%) and individual retirement accounts (0.7%). Share drafts declined 3.3% during March. “During the first quarter, credit union savings balances rose 5.7%, up from the 5% recorded in the first quarter of 2008,” Rick said. “U.S. households are changing their financial behavior by saving more, spending less, and trading down to less expensive substitutes. “Households’ decline in spending is reflected in credit union loan growth numbers,” he added. “For the first quarter, credit union loan balances rose 0.1%, down from 0.4% reported last year. For the full year, we expect loan growth to fall to 6%, the slowest since the 5.8% reported in 1998.” The movement’s overall capital-to-asset ratio decreased to 9.58% in March from 10.3% in February. The total dollar amount of capital ended the first quarter at $83 billion, a decrease of 6.5% from the previous month.

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The loan-to-savings ratio decreased to 78.8% in March from 79.9% in February. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--remained at 20%. Credit union 60-+-day delinquencies were 1.54% in March, an increase from 1.48% in February. “Credit union loan quality deteriorated further in March as the overall loan delinquency rate crossed over 1.5% to reach 1.54%,” Rick said. “With the unemployment rate expected to reach double digits over the next year, the delinquency rate is expected to climb over 1.75% in 2009.”